P L D 1990 Karachi 156 (PLP)

Shamsul Arfin for Plaintiff., A.H.Mirza for Defendants. Date of hearing: 22nd October, 1990. ORDER _ _. 57,, The plaintiff has filed this suit under the Admiralty jurisdiction of this Court claiming freight, demurrage, detention charges and miscellaneous expenses. Plaintiff is the owner of vessel m.v. Tarbela chartered to the defendant No.l under a voyage chartered party dated 15‑5‑1990. By an amendment this vessel was substituted by m.v. Lalazar. The vessel was to carry 10,000 metric tons of bagged cement from a port of Iraq to Chittagong or Mongla, Bengladesh. In pursuance of the said agreement the vessel proceeded to Ume‑Oasar, Iraq and reached the port on or about 11th June, 1990 and notice of readiness to load was given. The vessel was instructed by defendant No.l to take berth on 9th July, 1990 at 1700 hrs. She commenced loading on 11th July, 1990, and by 8th August, 1990 loaded the quantity of 7,334 M. Tons on board the vessel. While the vessel was at the port of loading in Iraq, Iraqi Government invaded Kuwait. The United Nations and Security Council passed Resolution No.661(1990) under which all kinds of imports from and exports to Iraq and Kuwait were banned. The import of goods produced or manufactured in Iraq and Kuwait was also prohibited. The vessel left the port at Iraq on or about 12th August, 1990 as instructed by the plaintiff. The Government at Bengladesh by a public notice dated 29‑8‑1990 notified that in view of the Resolution of United Nations all kinds of imports in Bengladesh of goods produced or manufactured in Iraq and Kuwait were banned and export from Bangladesh to Iraq and Kuwait was also prohibited. The Government of Pakistan also agreed to adhere with the Resolution of the United Nations and Security Council. In view of these eventualities defendant No.l wanted alteration in the bill of lading for taking the cargo to a port at Sri Lanka, to which the plaintiff did not agree. The plaintiff accordingly informed the defendant by telex dated 7‑10‑1990 that the voyage has frustrated. The plaintiff also informed the Government of Pakistan which advised that the cargo may be sold at Karachi. It was alleged in the telex that defendant No.l had intimated the plaintiff that it (defendant No.l) wanted to approach the Court at Karachi for direction for delivery of the cargo in question to which the plaintiff had no objection provided demurrage and other expenses are paid. In spite of the time given to defendant No.l no steps were taken by it. The plaintiff claims that it is entitled to recover from defendant No.l US $ 1,57,222 as freight, US $ 1,98,083 as demurrage, US $ 1,26,000 as detention charges and miscellanceous expenses at US $

695. Thus, a total of US $ 4,82,000 has been claimed by the plaintiff. The plaintiff has also filed an application under section 151, C.P.C. for appointment of an Officer of the Court to take possession of 7,334 metric tons of cement on board the vessel which has anchored at Karachi and sell the same by public auction and deposit the sale proceeds in Court. In the affidavit it has been stated that the cargo is subject to natural decay which is likely to turn solid and the vessel is in danger of sinking. Defendant No.l has filed counter‑affidavit denying that the voyage has frustrated and pleaded that the U.N. Resolution does not have the effect of frustrating the voyage as the bill of Wing was issued on 11th August, 1990 under which the plaintiff has agreed to carry the cargo. It is further stated that the notification by Bangladesh Government was issued on 29th August, 1990 and had the plaintiff not unauthorisedly stopped at Dubai, the voyage would have been accomplished. The plaintiff is itself to be blamed for the delay. The delivery of the cargo could not be taken due to unreasonable and unlawful demand of the plaintiff. Defendant No. 1 is ready and willing to take delivery of the cargo without prejudice to its stand and legal remedies. The plaintiffs claim is not maintainable. It has been pleaded that if the voyage has frustrated the plaintiff is bound to hand over the cargo free of freight and it is not entitled to claim any freight or demurrage. The main question for consideration is whether the goods on board the vessel should be discharged and sold as prayed by the plaintiff. The facts regarding Iraq's invasion on Kuwait, the Resolution passed by the United Nations and Security Council, its acceptance and enforcement by other countries including Pakistan and Bangladesh, and blockade of Iraq in pursuance of the .Resolution prima facie lead to the conclusion that due to supervening events situation had arisen which had made the performance of contract impossible. This is, however, a tentative opinion for the purposes of deciding this application because the defendant has taken the stand that in these circumstances charter party has not frustrated. It has been contended that as the bill of lading was issued on 11th August, 1990 after the resolution was passed by the United Nations the plaintiff is bound to perform the contract of carriage. In cases of a voyage charter party, as in the present case, the bill of lading issued to the Charterer is not treated as a contract of carriage. It is only a receipt acknowledging the receipt of goods which have been loaded on the ship in terms of charter party. Therefore, merely by issuing such a bill of lading on 11th August, 1989 the plaintiff did not enter into any new contract for carriage of cargo independent of the charter party. The parties have not filed the bill of lading. However, even if the bill of lading was issued after the United Nations had passed the resolution which was accepted and implemented by Pakistan and Bangladesh where the port of discharge is situated, the contract of carriage if evidenced by such bill of lading shall stand frustrated as it has become impossible of performance. In Esposito v. Bowden (1857) 7 EL & BL. 763 (783) Willes, J. observed: "As to the mode of the operation of war upon contracts of affreightment, made before, but which remain unexecuted at, the time it is declared, .and of which it makes the further execution unalwful or impossible, the authorities establish that the effect is to dissolve .the contract, and to absolve both parties from further performance of it." Clause 16 of the charter party relates to `War Risks' which includes `blockade'. According to clause 16(4) if the Master elects to proceed with the cargo and it appears that further performance of the contract will subject the vessel, cargo, Master and Crew to war risks the cargo shall be discharged as directed by the charterer. If no such order is received within 48 hours after despatch of telegraphic notice to charterer for nomination of a substitute discharging port, the owner shall be at liberty to discharge the cargo at a safe port p which shall be treated as fulfilment of contract and shall be entitled to freight. The charter party thus provides for the eventualities resulting in frustration of ' contract and regulates the rights of the parties. Although notice treating the contract frustrated was given by the plaintiff, defendant No. 1 did not challenge it nor nominated any port for discharge of cargo. Consequently prima facie the plaintiff became entitled to discharge the cargo to a safe port and claim the freight. Mr. Mirza, the learned counsel for respondent No.l has contended that assuming without admitting that the contract has frustrated, the plaintiff is not entitled to recover freight, demurrage and other charges. He has relied on St. Enoch Shipping Company v. Phosphate Mining Company (1916) 2 KB 624 where it was observed that "if a contract once made becomes legally impossible of performance, then in the absence of some new agreement the parties remain in the circumstances in which they find themselves. There is no new obligation upon one party to pay money to the other unless there is some contract to that effect". The question of recovery of freight in cases where contract of affreightment has frustrated during its currency is a complicated one and cannot or should not be finally decided in such interlocutory proceedings particularly when it involves interpretation of terms of charter party coupled with the fact that part of the contract has been performed. However, at this stage principles governing such situation may be stated mainly with a view to determine whether the plaintiff has succeeded in making out a prima facie case. Where frustration of contract is established the rights and liabilities of the parties for future performance come to an end. However, rights accrued F before the frustration are saved. In this regard reference can be made to French Marine v. Compagnie Napolitaine (1912) 2 A.C. 494 where while discussing the effect of frustration of a time charter during its currency it was observed that "there is no liability in respect of non‑performance in the future, but accrued rights remain untouchable and unenforceable". It was further observed that hire C7 not due at the time of frustration of charter was not payable. Scrutton on Charter ` Parties and Bills of Lading 19th Ed. at page 95 observed that "Where the obligations of a contract come to an end (or are discharged by impossibility of performance), the contract is not dissolved void ab initio. It remains a good contract upto the moment of dissolution. and in respect of accrued obligation". In this regard reference can be made to Blane Steamships v. Minister of Transport (1951) 2 K.B. 965(999 & 1000) and Arab Bank v. Barlays Bank (1954) A.C. 495 which illustrate the principles involved. Cavar on Carriage by Sea 13th Edition at page 574 relying on Byone v. Schiller (1871) L.R.6 Exh 20.319, Carr v. Wallachian Petroleum Co. (1867) L.R.I.P. 636 observed that "the rule applies generally where freight becomes due before the contract is frustrated, and if such freight has not been paid it must be". The recovery of hire charges due may also be possible in cases where the contract of affreightment provides for its payment notwithstanding the J frustration. In "The Legal Effects of War" by Lord Me Nair and A.D. Watts Fourth Edition at page 209 while referring to St. Enoch Shipping Company case and owner's right of recovery of freight, the law has been summarized in the following manner: "When a party to a contract is unable to perform it because it has become illegal to do so, he is unable to recover the reward which would have been due to him if he had performed the contract. So a British shipowner who has undertaken by a pre‑war bill of lading to carry a cargo to a port, Hamburg, which upon the outbreak of war becomes an enemy port, so that the further prosecution of the voyage becomes illegal, may retain any advance freight but is not entitled to recover other freight; nor in the absence of provision to the contrary in the bill of lading or of a new agreement will he be entitled to freight pro rata itineraries for carrying it to a reasonable non‑enemy port, Runcorn. `If a contract once made becomes legally impossible of performance, then in the absence of a new agreement the parties remain in the circumstances in which they find themselves." Prima facie the supervening events during the currency of the contract of affreightment have made its peformance impossible and attract War Risk clause (No.16) of the charter party. This clause prima facie entitles the plaintiff to L discharge the cargo at a safe place at the cost of the charterer of owner of cargo. It further entitles the palintiff to have lien for freight and expenses on the cargo. In these circumstances what should be done. No one has come forward to take delivery of the cargo except defendant No.l which wants the cargo to be delivered to it at a port of its choice but no safe port which may not involve war risks has been nominated. The plaintiffs vessel cannot be expected to remain anchored laden with cargo incurring heavy expenses deprived of her earnings till M the final disposal of the suit. It has been alleged that the cargo is perishable. The ship is laden with bagged cement which is likely to be damaged if ‑it remains on! high seas for a long time. Considering all these factors in my view the balance of I convenience is in favour of the plaintiff. If the cargo is not allowed to be off‑loaded then the plaintiff is likely to suffer irreparable damage. On my querry whether defendant No.l is prepared to provide warehouse for storage of the cargo, or obtain the cargo on prima facie proving its entitlement to receive it on furnishing bank guarantee for the plaintiffs claim Mr. Mirza . on instructions did not reply in the affirmative but stated that defendant No.l leaves it to the decision of the Court. In these circumstances the best course open for the benefit of all the parties concerned is that cargo should be off‑loaded and stored in a bounded warehouse. The discharge and storage of the cargo shall be subject to the lien of plaintiff provided it exists. The first option is given to defendant No.l to arrange for the discharge and storage of the cargo. Mr. Zahiruddin Khan Advocate is appointed Commissioner to supervise through Mr. Saeed Bhombal of M/s. Bhombal & Co Surveyors the discharge and storage of the cargo and its safe custody till its disposal of delivery. The surveyors will inspect the cargo before discharge and also after the discharge and storage in the warehouse and submit his report within one week thereafter. Tentative fee of Rs. 20,000 should be deposited by defendant No.l. After discharge the cargo shall remain in the custody of the Commissioner till further order. All expenses in this regard shall be borne by defendant No.l. If defendant No.l does not deposit Rs. 20,000 and fails to arrange warehouse upto 3‑11‑1990, or intimates the Court in writing its refusal to comply with the order earlier then the plaintiff shall be entitled to arrange the discharge and storage in the warehouse on the same terms and conditions as stated above. The expenses incurred by the plaintiff shall be a charge on the cargo and its sale proceeds. After the cargo has been discharged and report of the surveyors submitted in Court, the parties or any person claiming the cargo may be at liberty to file application for its disposal or delivery as the case may be. M.BA./P‑167/K Order accordingly.